Atlassian Corporation (TEAM) Q1 2021 Earnings Report, Transcript and Summary

Good afternoon and thank you for joining Atlassian's Earnings Conference Call for the First Quarter of Fiscal 2021. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Atlassian's website following this call. I will now hand the call over to Matt Sonefeldt, Atlassian's Head of Investor Relations. Please go ahead.

Good afternoon, and welcome to our Q1 Fiscal 2021 earnings call. Thank you for joining us today. On the call today, we have Atlassian's Co-Founders and Co-CEOs, Scott Farquhar and Mike Cannon-Brookes; and our Chief Financial Officer, James Beer. Earlier today, we issued a press release and a shareholder letter with our financial results and commentary for our first quarter of fiscal 2021. These items were also posted on the Investor Relations section of our website. On our IR site, we have also posted a supplemental data sheet. During the call, we'll make brief opening remarks and then spend the remainder of time on Q&A. This call will include forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made. And we disclaim any obligation to update or revise them should they change or cease to be updated. Further information on these and other factors that could affect the company's financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled Risk Factors in our most recent Form 20-F and quarterly 6-K. In addition, during today's call, we will discuss non-IFRS financial measures. These non-IFRS financial measures are in addition to, and not a substitute for or superior to measures of financial performance prepared in accordance with IFRS. There are a number of limitations related to the use of these non-IFRS financial measures versus their nearest IFRS equivalents, and they may be different from non-IFRS and non-GAAP measures used by other companies. A reconciliation between IFRS and non-IFRS financial measures is available in our earnings release, our shareholder letter and in our updated investor sheet on the IR website. During Q&A, please ask your full question upfront so that we can easily move through to the next speaker. Also, please be patient if we encounter any disruptions or challenges. Lastly, we’ve announced two additional items in conjunction with our financial results this quarter and we filed Form 6-K announcing the successful close of a $1 billion senior unsecured delay

Thank you, everyone, for joining today and for your continued support. We hope you and your loved ones are healthy during what continues to be a dynamic time for everyone, including our customers, partners and employees. We hope you've taken the time to read the shareholder letter. This quarter, we've been transparent in describing the many different long-term initiatives that we're focused on as a company. This includes our recent announcement focused on migrating our customers from server products to the Cloud. In Q1, we posted strong results, adding over 8,600 net new customers, generated $460 million in revenue up 26% year-over-year, and realizing solid non-IFRS profitability of $61 million in free cash flow. We've got several product wins as well, including achieving FedRAMP certification for Trello Enterprise, strengthening our partnership with Slack, launching Atlassian Ventures, and closing the Mindville acquisition which accelerates our ability to offer customers a comprehensive ITSM experience. Looking forward to the rest of fiscal 2021, we’ll continue to focus on playing offense for the long-term. All of our choices and actions focus on making our customers successful and drive us through $5 billion and beyond. Before we move to Q&A, Scott and I both want to thank our employees who continue to be an inspiration for us in these challenging times. Thank you for sharing your passion with our customers, especially as they move to the Cloud. You make unleashing the potential of all teams possible. With that, I’ll pass the call to the operator for Q&A.

Your first question comes from the line of Michael Turrin from Wells Fargo. Your line is open.

Hey, there. Thanks and good afternoon. On the Cloud migration, I'm sure there will be a number of questions on it. Obviously, super early and appreciate there's an Investor Day upcoming, which we're certainly all looking forward to. But any initial feedback you've gathered from customers and partners early on to share? And I think it's unquestionably the right strategic decision. But in terms of the risks to be aware of, how you think about the potential friction, a hard and fast timeline can add to the equation. And you mentioned some of this in the letter as well. But can you talk through some of the steps you're taking to help ensure this transition as frictionless as possible? Thank you.

Hi, (inaudible) this is Mike. Hi there, can you hear me? This is Mike.

We can hear you now, Mike.

Thank you. Sorry, apologies for that. As I was saying beforehand reaching it, because I was on mute. The customer feedback has been lastly as we expected. So, we've had the expected range of responses, I would say, our customer base has been awesome and coming to us with questions. We've given a long timeframe here. So there's multiple years. So when you sit down with the customers and explain how you've got us here to make a decision. This is a three year end-of-life timeframe. And there are a lot of options for you. Our teams have done an amazing job with content to help customers through that journey. So we've got, I think 10, or 12 different language translations, there's a million plus words of content out there, which I'm told is longer than the entire Harry Potter series. So this has really been an all company effort to make sure that this is handled well with a customer first lens and tries to be as clear and empathetic to customers as possible as we move through that. Obviously, as we discussed in Q4, we think we're ready to make this transition. It's been a long-term journey, we've been working on for a long time. And this is just the next step on that journey, particularly. We've had more than a decade long history now building Cloud products and a multi-year investment in our Cloud platform. And we really believe, as we showed from more than 95% of new customers choosing today, we're at the right particular time to move our customers across. But necessarily this is an announcement that for some customers it's a little interesting to receive. And I think the team has done a fantastic job. And we will succeed in guiding everyone through that over time.

Great color. Best of luck. Thank you.

Your next question comes from the line of Keith Weiss from Morgan Stanley, your line is open.

Thank you guys for taking the question. Really nice quarter, this quarter in terms of the new customer. I don't think we've seen a number that strong in quite some time. Two questions, well one question on that. In the letter, it sounds like you guys don't expect that level of customer gains to maintain on a go forward basis, if we talked about why not like sort of what is going to bring those back down on a go forward basis and then maybe one for James. On the guidance for the full-year and the slowing down, it seems to seem that like the line is going to have to slow down for the remainder of the year. Like I get what's going on with license I get what's going on with maintenance and in the marketplace, I don't quite get kind of what the pressures are on subscriptions, could you dig into that a little bit for us and sort of why the shift towards Cloud doesn't have a more immediate positive impact, at least on the subscription line?

Yes, Keith, I would go and take both of those. So first of all, on the customer edge, yes, we were very pleased with that figure. A couple of things though, that I think probably did help somewhat in this quarter. First of all, you recall that in Q4, we had a relatively low customer add number. And what we talked about there was COVID related churn effects impacting some of our cloud customers in particular. And I think part of what we've seen here is in essence, a little bit of a pull forward of that churn from Q1 into Q4, as those customers were experiencing, obviously, very tough macro economic conditions. And so I think some of those who perhaps might have churned in Q1, under normal circumstances, ended up churning earlier in Q4. The other thing I'd point to is that we obviously as you know, have really established free versions of Jira Software Confluence and Jira Service Desk in the market now. And as a result of doing that, we've curtailed our Cloud Starter offering. And so for those folks, we've seen a nice portion of them moving up to a full standard Cloud license, and therefore being counted in our definition of a customer. So both of those things wouldn't expect those to be recurring necessarily in the coming quarters. But certainly, yes, we're very pleased with that, that customer number. That's a nice illustration of the power of our land and expand model. To the revenue picture, a few thoughts on this one. During this next phase of the cloud transition, we've really given our 30,000 or so server customers the control to pick their migration path and the timing of that move. And so this will introduce a degree of variability into our financial model, likely over the coming handful or so of quarters. And so given this variability, we wanted to provide everyone with something of a framework as you consider a revenue growth during this transitional period. And I think of that framework is having five themes to it that we've really generally discussed with you previously. First of all, consider COVID-19 and the resulting challenging macroeconomic environment that's created for our customers. Q1 in this regard was quite encouraging versus Q4 of the last fiscal years in terms of the figures, and based on what we've seen in Q2 and those numbers so far, we continue to be encouraged. And so we're assuming that this headwind diminishes steadily, but will still be a factor in our revenue results, including the subscription line in particular, because we've seen, obviously, our smaller customers generally use our cloud products, we would see that being sort of factor over the next handful of quarters or so.

That was a robust answer. One quick follow-up when just thinking about license revenues, basically getting cut in half or debt down 50% year-on-year, does that include an assumption of any potential pull forward by the server customers to try to like top up on server licenses in the near-term? Or do you not think that's going to happen?

Well, I think there will be some pull forward activity as in previous years, we're giving customers time to think about how to step in front of those price increases that come into effect on this coming February the 2nd. So yes in our modeling, we do try to predict some amount of that pull forward. But that's always a challenging exercise, I'd say it's more difficult this year, because this time, we've actually announced the end-of-life of server, so how customers will adjust in their pull forward activity. So that really remains to be seen over the next several weeks.

Got it. That's very helpful. Thank you.

Okay, thanks.

Your next question comes from the line of Walter Pritchard from Citi, your line is open.

Hi, thanks. Just to build on the last one, we talked a lot about server. And that's pretty clear with the end of license and so forth. Around data center, how are you expecting that the news that you put out around server will impact the larger customers who are on data center who may look at this move and say, data centers and that's just the path that Atlassian going with the innovation is and so forth in cloud, do you expect even though it's not directing out there that you'll have sort of induced a behavior change there as well?

Scott here, I’ll take that. Look I mean what we've said to our customers is, some of our largest customers are choosing to remain on data center, because they have a longer timeframe that they want to migrate, and we're continuing to invest in our data center product. And just a reminder, for some of those who haven't read all the announcements, ended like server product, but our data center product continues to be something Atlassian builds upon and supports and continues to invest in. Now, that said, I have talked to a whole number of CIOs over the last three months, from everything from regulated industries, banks, European customers, and every single one of those CIOs has a plan to move to our cloud. And when they're in a regulated industry or European customer, and it's just a matter of when, so our data center product is going to be critical and making sure that customers are supported over their timeframe for migration. But we expect that all our customers will migrate to cloud over the medium-term.

Your next question comes from the line of Gregg Moskowitz with Mizuho. Your line is open.

Okay, thank you very much for taking the question. James, I wanted to circle back I guess on fiscal 2022, because clearly, there are some puts and takes and you alluded to some of them, but I guess as I think about it, on one hand, there will be an additional loss of perpetual license revenue. There will be significant ongoing migration incentives. But on the other hand, you're going to get more benefit from the upcoming price increases, more conversions from free to paid. And the loyalty discounts in year two, for large customers naturally won't be as significant. Now in the shareholder letter, you said that fiscal 2022 will also be negatively impacted by all of the changes that you've recently made. But just to be clear on this point, any revenue headwinds will be greater in fiscal 2021 and fiscal 2022. Correct?

Well, what I was chanting about Gregg as I kind of walked through that five point framework with the different timeframes that I feel will be relevant for each of those factors as you frame there and the question, you've got a lot of moving parts. I'd say the net of all of this is that the revenue growth rate would begin improving again, beyond the next year or so. So, in the lesson, we use similar words in my section. But that's how I think you should consider the trajectory of the revenue growth rate pattern.

Okay, that's helpful. Thanks, James. And then just a quick follow-up, there was a comment that the current expectation is that there will be lower take rates on the sales of cloud apps through the Atlassian marketplace, I suppose over there, the rest of the year for the near-term anyway, and just kind of wondering what will be the case?

Yes, there we’re just very much looking to continue to provide rich incentives for our app, ecosystem partners, to build more cloud apps and have them be in our marketplace. Obviously, that marketplace started out life many years ago, as a server based marketplace more recently, within the last year and a half or so, we've really focused on expanding the data center apps as well. And with this very clear focus we have as a company now on the cloud transition, obviously, we want to make sure that our customers can gain access to the same sort of functionality that they really benefit from in the current apps behind the firewall, available in the cloud as well. So we just want to make sure that the financial incentives for our app developers line-up with that. And as we mentioned in the less, we've designed those as temporary incentives.

Okay, perfect. Thank you.

Okay.

Your next question comes from the line of Alex Kurtz from KeyBanc Capital Markets. Your line is open.

Thanks for taking the question. I just want to round back to the blog post that you put out a couple of weeks ago about the changing and the server pricing. But you also have a comment on the blog post around future cloud pricing. I know today in the shareholder letter blog posts, which seems to imply that the customers in the advantage pricing program might eventually be moved up the list price. So maybe just help me navigate that and what that could mean for a potential cloud price increase for those cloud customers?

This is James, I'll take a crack at that, Alex, but you broke up there in the middle part of your question. So you can stare me, if I'm not answering for that. But in terms of what we've talked about in that blog post a couple of weeks ago, yes, we’re rising prices, effective February, the 2nd for our server and data center products. And we note in the shareholder letter, that while yes, you've got to be very thoughtful about user tiers and product combinations for specific price outcomes. If you're a customer, directionally from a modeling perspective, they equate to about 15% increases year-over-year, we're very explicitly not rising cloud prices this year versus the case where we have done that, in whole or in part in previous years. And in terms of your reference to advantage pricing. Yes, there were some price list for current customers, when we've rolled some of these price increases through, we've always wanted to be thoughtful about the degree of change that the customer is taking on in terms of price. And so in each of these situations, the end result is list price. But it just takes longer than just an immediate step function up to the new list price. It’s just reflective of people, customers current budgets, and those sorts of things. So does that give it what you’re asking?

Yes, it does. So just to be clear, the advantaged pricing plan is probably for a very small sub segment of your cloud customers?

Yes, so the advantage to cloud customers were those you may recall a year-ago for the higher user tier part of our cloud pricing structure. So certainly a year-ago, we had relatively few customers in that part of our customer base. And yes, we moved prices up for those higher cloud tiers. So for those customers who have gone early to, the larger scale end of the cloud, we're giving them more time to come up to list. Yes, that's a relatively small proportion of the overall cloud user base.

Thank you.

Alex, it’s Scott Farquhar here. Just to chime in and add to James like, that's a great question on the detail. But philosophically, we want to get our customers to the cloud, when I talk to companies big and small, they want to move across to the cloud. We know that over time, because we solve a lot more problems for them, and take a lot of the management overhead from them, the scalability issue, the hardware costs, because we do all that on their behalf, they're willing to pay larger, high prices in order for us to order them. And the cost savings are significant. In many cases, they will, if you have a team of five or six people, managing our products, when you make them yourself, that's down, we have a case study with a standard under a person now, and so those cost savings, we can capture some of that. And the aim is, in the short term, though to make it an absolutely easy decision for people to move across without trying to get into discussions in their organization, it's like, let's just move across, and we try and make the cost and price, relatively the same in the sort of first year of transfer and over time, step them back up and capture sort of more of the value that we're providing for them. And so really, there's a lot of ways you could slice it differently. And we think this one is very customer friendly. And we've always thought about the long-term customer relationship. We have from planning level, all the way up to CIOs very large organizations, so we want to have a great relationships as we provide more and more products for them, and we sell them more, more things. But also that one of them is possible without any sort of (inaudible) something in a way. So that's sort of the philosophy behind it.

Thank you.

Your next question comes from the line of Ittai Kidron from Oppenheimer. Your line is open.

Thanks, and good quarter guys. Leaving the cloud on the side for a second. Scott, and Mike maybe can talk about Trello. In the work management space, maybe you could talk about progress over there and maybe fine tune to kind of differentiation with it and although it is public, how do you see the landscape? How do you see your competitive positioning there and opportunities ahead? And then for James, just kind of following-up on the data center side of the equation, correct me if I'm wrong, that is a term business. So that shows up in subscription revenue? But can you tell us the magnitude how much of your subscription revenue is tied to on-premise, not to cloud, perhaps number of customers? I think it was 30,000 enterprise customers, what would be the count on the data center side?

Sure, Ittai, this is Mike. Hope you’re doing well. Look on the work management side, I can give you some color, it wasn't a specific question. I suppose. Obviously, look you saw us in the quarter on specifics. We got support for Trello in FedRAMP, for obvious reason to Trello is doing well in the government sector and continues to grow there. I'd say the broader story there is around Trello in the enterprise. And as the extremely large Trello user base continues to grow a pace, how that is starting to get into larger organizations, like the government obviously indicated from that. At the same time, Trello continues to sort of broaden the appeal of its product. So you've seen us do a lot of work with what we call Trello Views. So changing the way that you see the data that's inside Trello, and also embedding Trello into a lot of other places. In a broader sense, I would say look, that that area of work management for all continues to be one that we’re spending a lot of time in. Confluence continues to grow very well. And you've seen us with the Halp acquisition in terms of providing a sort of service management experience inside of Slack and inside of Messaging Tools, which is used by IT certainly, but used increasingly by other teams where that's much more familiar interface for them to provide a service management capability. So I think we're credibly positive about all of the things we have going on in that area. Continued innovation and continued enterprise growth of work management for all tools, I think bodes very well for us in that space.

And Ittai, this is James. So I can jump in on the second part of your question. So yes, data center has accounted for in the subscription revenue line. And I think the way to really think about that is that subscription in Q1 represented 60% of total revenue. And recall in the past, we've said that the cloud business is just a little shy of 50% of total revenue at this point. So that gives you directionally a sense for the scale of the data center business. And in terms of customer counts, some of the other data points we've offered, now we have 180,000, 200,000 plus total customers. And we've talked about 160,000 cloud customers. So again, that gives you a little bit of a sense as directionally the overall customer count.

Your next question comes from the line of Brent Thill from Jefferies, your line is open.

Hey guys, this is Luv Sodha on for Brent Thill. Nice quarter and great investments on the cloud side, I wanted to ask a couple of questions. One was, in terms of server, you provide great color on server to cloud pricing. I was wondering like, what would be the -- in terms of any color, you could provide on server to data center pricing, in terms of what's the difference and what the migration process entails there? And then the second question was around the Mindville acquisition that you closed this quarter? Obviously, how does it position you relative to the competitors in that marketplace in the ITSM space? Thank you.

Well, I can perhaps take the first part of the question in terms of the economics of moving from server to datacenter, really quite similar to the situation, when customers electing to move over to the cloud for our larger customers in the 1000s plus seat grade, we would again look to offer material discount levels, less than those that we will be offering someone moving over to the cloud, but still material discount levels over a multiyear period. So it's a similar approach, reflecting the comments that Scott, and Mike made earlier that the data center is very much still a deployment option that we continue to invest in for the future. So I'll pass over to Mike or Scott for the Mindville part. Mike?

Thanks, Luv. Thanks James, thanks Luv for the question I can certainly take that. Look, we continue to be incredibly excited about what's going on in the ITSM space as we continue our long-term journey in that space, it really has been a series of years now. I think if you zoom out you can look at that and see how kaleidoscope of options, there are many, many ways that companies can provide ITSM solutions, I do think what we’re doing is bringing that into pretty sharp focus. And if you look at our offerings continuing to mature and the way we've taken Jira Service Desk, and then adding status page for external communication adding Opsgenie to provide rostering and real time management capabilities of your team and bringing them into incidence. And then obviously, adding Mindville for CMDB capabilities. So asset management of all types, alongside our service management capabilities that we've released. So not only managing the services that are outbound, but also providing a registry of the inside services, the technology services that you have inside your company, what we're starting to do is really provide a single pane of glass that can look across your IT operations and development teams. As teams and companies are increasingly bringing their development teams closer to their IT teams, we're providing a singular set of offerings that run across that. And as we continue to integrate them and add the Atlassian platform under all of them, we're obviously incredibly excited about both the growth of the space but also the uniqueness and the clarity that our offering brings to otherwise quite blurry space around there and the uniqueness of that offering. So really excited about that space going forward. And, you'll continue to see us investing there and continue to see us having big investments in that space.

Your next question comes from the line of Jack Andrews from Needham. Your line is open.

Good afternoon, thanks for taking my question, I want to ask about the work you're doing or initiatives you have in place to gain more leverage with some global systems integrators and particularly thinking about something like Jira Align, I mean how important is it to engage with these types of partners for you these days?

Scott here, and thanks for question, Jack. Systems integrators, great partners, partners are being a huge part of Atlassian’s success. We have a great partner network, hundreds of partners around the world, particularly in Europe is a real big strength for us. And there as we see with some of our larger engagements with customers on the larger side like most of them are bringing in and working with a systems integrator on those transformations. And particularly if you think about digital transformation, a lot of what needs to get done in those organizations is not simply the deployment of software, it's actually changing the way that these organizations work to do agile transformation or scaled agile framework, and so forth. And so these systems integrators are really important to be on the ground to help out some of these transformations that that happen. And so, particularly happy with the systems integrators and you would also say our migrations, people migrating to the cloud is a huge opportunity for our systems integrators. And we've seen some of our best partners build migrations practices already if you go to the cloud. And that's been a great source of business for them, and also a great way for our customers to get across to the cloud faster. And of course we continue our depth of portfolio that we provide to CIOs in terms of reverting from the Jira framework and Confluence, but all the way up to Jira Align, which handles effectively the CIOs dashboard about how their organization is going into digital transformation. Again, that makes us more strategic for customers and our customers they walk to partners to help them deploy and roll that out.

Your next question comes from the line of Rishi Jaluria from D.A. Davidson. Your line is open.

Hey, guys, thanks so much for taking my questions. Just two quick ones. First, if we do kind of the back of the envelope math, you've got roughly 60% of your customer base, that's using a hybrid, some products on-premise, some products in the cloud, can you give us a little bit more color on what these sort of situations look like as a function of, they might be using Jira on-premise and Trello in the cloud? Or is it a departmental level thing where the initial adopters are using Jira Server Data Center, and new teams are jumping straight to Jira Cloud. And then the second is just on thinking through the longer-term COVID impact over the past couple of quarters, you've identified some of the headwinds from SMB exposure and payment duration, when we look out maybe longer term, especially given that it's looking likely that we're going to be in a much more distributed workforce even post-pandemic, how do you think that that shapes maybe the necessity for your solutions and the demand environment? Thanks.

It's great questions. And firstly, I'm not sure the back of the envelope is 60% of customers is necessarily right. But we said in the past that 95% of our new customers use our cloud offerings. And while we don't disclose the overlaps, like I can talk through the reasons for that, one of the advantages of cloud is the intake going really quickly. You don't need to deploy hardware, you don't need to kind of confine space in your data center. And so what we find is even amongst our largest customers that I have deployed, wall to wall with our data center or server offerings, and with new projects where they want to get off the ground, quickly in many cases, will deploy a cloud version of our products. I mean so we find that, even the kinds of customers you find using cloud products, and in many cases, that's sort of the White House department inside those companies as they ought to migrate to cloud. So I think it really speaks to the ease and speed of which customers can get going in that cloud. Do you see that? The hybrid and of course, over time, we'll see those cloud things scale. On the distributed workforce side of things, what we saw in the initial days of COVID was a spike in our web traffic, I think in the order of roughly 10%, where we saw not a huge spike in customers within days of the pandemic, but because our existing customers were using our products with a high frequency, and that that is that there was no posted notes, no whiteboards, and they need want to track all the work they're doing inside our tools. And there's a huge opportunity for that because once you track work in a product like Jira, Trello, Confluence or any of our products, there's opportunities for automation, which we've seen with all our investments in automation and Atlassian’s automation products. And there's investments of smarts and we've seen some announcements recently around how we're using data machine learning to better route work to the right people. And so we think there's a huge opportunity for our products to help with the workforce. And the other thing, which was surprising for me, when I chatted with CIOs, is that the CIOs agenda has never been more aligned with the CEOs agenda. If you went back to the 15 years as CEO and CIOs agenda would be, sort of marginally overlapping whereas today, the same problem CEOs are struggling with riches, how do I make my workforce productive while we're remote. And how do I serve our customers in a new way? Particularly, if I've had to move out transactions with our customers online. How do I make sure my employees are healthy? How do I make sure, and the workflows across the organization are moving fast, like, these are all CEO conversations and board level conversations that are happening when the CIO is now on the hook for doing that. And now used to be that HR is responsible for the water cooler. Now CIOs are responsible for the digital water cooler. And so what surprised me is how much interest has been around culture from CIOs, who traditionally wouldn't be thinking, and that that would be front of mind for them. And because Atlassian and the way we worked and how we work openly and how our products promote an open and transparent culture, they turned us as a trusted partner to help them transform their organizations.

Your next question comes from the line of Derrick Wood from Cowen and Company, your line is open.

Great, this is actually Nick Altmann on for Derrick. Thanks for taking our questions. You guys have talked about your hiring plan for this year. And you've said the bulk of the hiring is going to be going to R&D. I guess when you look at the product portfolio, where are the pockets that you guys will be focused on the most from an R&D perspective? And I guess how much of the effort is going to be directed around furthering the cloud enablement of the portfolio versus net new offerings?

Nick, look firstly, I think I would zoom out to start that into, as we said a few times, we're in three very large markets between work management for all the software Agile, DevOps, a market and then into, obviously, the IT and ITSM market. One of our advantages, is not only are these three fantastic markets that are incredibly critical to customers and companies out there, as Scott mentioned, they’re all are connected at various different points. One of the strengths, Atlassian has is having products. Confluence runs across all three, Jira as a platform runs across all three, Trello is increasingly used in lots of different places across all three. So having products and connections between these markets, as we've mentioned, software coming closer to IT, obviously, the IT department being more involved in all sorts of work management capabilities. These connectivities are huge strategic strengths of ours, but require R&D investment, they require us to continue to bring products closer together, to allow customers to reuse data across different spaces, and building out our cloud infrastructure to handle all the enterprise needs of customers, as well as the work management and the automation data platforms, as Scott has mentioned. So, yes, we’ll certainly continue to invest in R&D across a lot of those areas. Our platform is the continued place of some significant investment, both to bring our marketplace up to speed. But also, as I mentioned to look across the increasing amount of data we have and providing better answers, automation AI, there's lots of things that we're doing and building there. We’re always looking at building new products, we always have a series of different prototypes and teams working on things internally. Sometimes those become products for the outside world, sometimes actually get merged into existing applications and become features of what we're already doing. So one of the advantages of our business model, obviously, is our ability to invest in R&D and continue to keep that innovation going. One of the advantages of our D&A is the long-term thinking and when you put both together, I think that's part of the reason we've been so successful for almost two decades now and intend to continuing to do so. So we don't generally provide any specifics. But hopefully that gives you a little bit of color about where some of that R&D is going and why we're excited about our possibilities in the markets we’re in.

Your next question comes from the line of Robert Majek from Raymond James. Your line is open.

Great, thanks. Can you update us on the customer transition from standard to premium skews? What is customer feedback been like on premium? What's the mix today? And where can that mix go as we look out a few years?

Rob, it’s Scott here, we're really pleased with the customer adoption of premium. As you know, in the last, probably 18 months, we've introduced premium and enterprise versions of our cloud skews. So previously, there was really only one price you could pay for say, Jira or Confluence, Jira Service Desk. And we've now sort of got tearing in those structures, our premium lean affiliate that ramping up now. So that is a widely available and widely adopted product. And Enterprise is really, in the early stages, like we've announced it and we've got some early customers using it but it's still ramping-up. I would say we’re giving specific numbers, we've been extremely happy with the premium adoption of our products. We're still in the stages as we add more features, they get adopted at a higher rate and the satisfaction for those customers has been really high. And as a reminder, the premium version of that products include feature differentiation, they also include higher for customers who are mission critical and so we've seen kind of that combination video really valuable one desirable one for our customer base. So, yes, very excited and very happy with it.

Okay. And with the launch of Atlassian Ventures, can you help us frame the positive impact that might have on the ecosystem as well as future marketplace revenues?

Sure, I just want to add one thing, I'll get to ventures on premium and enterprise additions in the cloud, a reminder that most customers will tend to migrate. And obviously migrations going very well, we're up about 90% year-on-year in terms of the number of users that are migrating, and obviously offers small base. But as we continue to increase that with tools and with partnerships that's going to grow, most customers will migrate probably to cloud standard. And then over time as their cloud journey, as they increase their confidence in Atlassian’s Cloud, and they need more features and capabilities. Once they're in the cloud, they'll then sort of move up through premium and enterprise depending on their company, and their journey. So just to be clear, I'm not sure people will necessarily move from on prem, straight to cloud premium, but that'll be, as they mature in their Atlassian journey. On Atlassian Ventures, of course incredibly excited about this, we've done a few investments in the past as Atlassian. This is, I would say a sign of our maturation as a company, having a formal brand, a formal budget, and a team that is focused on doing this allows us to better serve the ecosystem and economy around Atlassian. Right, it’s not all about acquisitions. There's a lot of work to be done in investments and partnerships. And we'll just continue to mature and grow in stature in all of those areas as we become a part of the larger scale tech economy. And I think it's a great step for us to continue to go albeit done with Atlassian’s general sort of pragmatic, long-term focus on how we do this. So obviously, that's not a short-term issue.

Your next question comes from the line of Jim Fish from Piper Sandler, your line is open.

Hey, guys, this is Quinton on for Jim, thanks for taking our question. Just two high level questions from us. First IT operations is a massive and somewhat newish opportunity for Atlassian. Is there any way to think about the revenue contribution today outside of the core software dev market? And then additionally, wondering if you guys have seen any material changes in the hiring of developers or IT professionals in general that may help expand Atlassian usage?

Scott here, and Quinton great questions. What we're seeing in the Dev and IT markets is the continual overlap of those markets. And so if you would pick a like and put them into three buckets, but these days, most of what IT people are doing is involving software. I know lot of the IT operations stuff is running and managing software. And that's an area where we believe we have a unique advantage as the vendor that powers more software teams than anyone else on the planet. And we think we have a huge opportunity there to bring those, those two things closer together. If you think about how we have probably mentioned before, in terms of planning and managing work, Jira, Jira and Confluence come in, we do an incredible job there and we handle everything from someone putting something on that Sprint backlog all the way up to the Jira Align and managing 10,000 people, then through development like, there are a lot of vendors there. And we actually partner with a huge number of vendors in that sort of code and test and deploy side of things. And in the run side of things, run, manage, support area, that's where you’ve seen us make a large number of investments over the past couple of years, everything from Jira Service Desk, which has been in the market now for quite a while due to opportunity status page. And the investments that Mike talked about with Mindville recently and so that is a huge area of investment for us. And as you see like everyone that build software now has to align it and those things that cause never before. So we don’t break them out as much if something we see those (inaudible) developers are now on call and on support, it’s not a separate team sitting in a network operation center anymore, it’s the people that build it, now run it and so the developers are managing our products there. That was on the first part, on the hiring of developers, what you see across the entire industry now is 10 years of digital transformation happened in 10 weeks and so the demand for IT professionals and developments and people can build software is higher than it's ever been. And what you're seeing is organizations saying, well, we want to hire developers, and if we can't do that, how do we get other developers be more productive? And so you see the rise of workflow applications like Atlassians where you can take, you don't necessarily need a software developer to make sure workflow applications happen and run across your organization. You see work code, opportunities, which people using Atlassian platform to automate things across their entire organization and automation, which we've invested heavily in, and to make sure that all of the busy work that goes away. And so in terms of we’re delivering numbers from any third-party in terms of hiring developers, but I would expect that to be a pinch point for most organizations for the foreseeable future.

Your next question comes from the line of Arjun Bhatia from William Blair. Your line is open.

Hey, guys, this is Dylan Becker on for Arjun. I appreciate you taking the time the question, just one quick one from us. And I kind of wanted to touch on Trello, as you've made some kind of changes here in 2019 with the Paywalls and the acquisition of Butler, but kind of thinking, how was the monetization of the product change? And then how are you measuring the kind of success from this product looking into fiscal 2021? Thank you.

Thanks, Dylan. Look as we've been on a long-term journey with Trello, we've always said the most important thing is to keep the product growing as a whole. Trello is a monster product, 10s of millions of users and continuing to grow fast. And for the long-term perspective, having those 10s of millions of users continuing to grow is the number one priority. And we've been pretty clear about that. That said, we have continued to apply Atlassian’s expertise in pricing and packaging to work out how we get the best customer outcomes and the best Atlassian outcomes so that we can continue to invest in the product. That journey has been going quite well, as you mentioned, we've changed some of the ways that it's charged in a couple of times now over the years, and that continues to drive the top line that Trello is contributing to Atlassian. Things like Butler provide more differentiation. So that's the sort of automation capabilities for Trello. And you're saying that with the continued work, we're doing around Trello’s views, so providing more ways to look, we've got a calendar view and a map view at the moment, we've got a title view that's in the public data at the moment. So continuing to have different ways to look at the data that's inside Trello, also gives us some capabilities to look at the different paid additions, and add different view capabilities as you go through there. So I think look, our continued number one focus for Trello, as I've said is the user base and continue to just make it a standard. The other thing we're also doing with Trello is continuing to bring it closer to the Atlassian family as you've seen with the identity stack underneath moving to the Atlassian Identity platform, which by itself handle 10s of millions of users. So it's very helpful to bring that Trello user base closer to the Atlassian user base over time. And obviously things like Access is a monetization angle across Trello as well as connections to obviously the Jira Software, Jira Service Desk to Halp and to Confluence, obviously. So bringing it closer to the Atlassian family is a part of the monetization journey for Trello as well.

Your next question comes from the line of Ari Terjanian from Cleveland Research. Your line is open.

Hi guys, thanks for taking the question and congrats on the results. Just want to double click on the comment around code app development. It's an area we're seeing increasing strength, certainly this year around price communications or tracking trace et cetera. Any thoughts around furthering efforts here? Obviously, Forge is a great first step. But any more color you can share on new use cases and ways you're seeing people use Atlassian as a locoed platform in this environment? Thanks.

(Inaudible)

Hang on, we've lost you, Scott.

Apologies there, sorry. One of the benefits we've had over the long-term of Atlassian is that our products are incredibly flexible. And our customers have used them for all manner of things. And so we see Atlassian products use everything from HR, recruiting and onboarding of employees. We've seen them for people NASDAQ listed company uses Atlassian’s products to handle their quarterly calls process in finance, and the advantage I guess is our products are very fast to rollouts. They’re widely deployed inside an organization. And they have customization that varies from just changing internal kind of interface and configuring workflows and custom fields, all the way through to our riding Forge, which is in a Forge application through to building complicated applications that are, you can deploy and use from our marketplace. And so we've seen that sort of the use cases will be too numerous to get into on this call. But we've seen Atlassian products be used across the entire organization. The example we’ve said previously Twitter uses Atlassian for 100s of service types, I think with 140 service types starting from legal service types to HR, across the entire organization and so we see Atlassian as a platform where people do move work across their organizations and as Mike alluded to as we continue to build out that platform, it gets used to more and more use cases.

There are no further questions at this time. I’ll pass the call back to Scott Farquhar for closing remarks.

Thanks everyone for joining our call today. We appreciate your ongoing support and we really like that you and your loved one remain safe and healthy. We hope to see all of you at Investor Day on November the 17th. Thanks a lot.

That concludes today’s conference call. You may now disconnect.